Maquila is the most popular tax incentive of Paraguay. You can reexport goods, services or products by paying only 1% tax on the locally added value and the operation is import duty exempt. The objective of the Maquila (and other tax incentives of Paraguay) to create employment for the Paraguayan people, develop industries and increase exports through attracting foreign and local investors, who can benefit from the simplified low-tax schemes.
Requirements of the Maquila in Paraguay
All types of products and services can be included in a maquila project; there are no restrictions. Any products and services can be produced and offered. The governing legal body of the tax incentive is the National Council of the Maquiladora Export Industry (CNIME).
What is Maquila tax regime of Paraguay and how does a Maquila project work?
In Paraguay, companies of the Maquila regime are exempt from all taxes and fees related to the production process. However, these individuals or companies will be charged with the “Maquila Unique Tribute”. It is 1% of the added value created in Paraguay.
The investor can introduce products or services to the country to be assembled, repaired, improved, worked or processed for subsequent export, once the added value or “Paraguayan element” has been incorporated. The Maquila is also VAT (value-added tax) exempt! There are no other taxes on your maquila company in Paraguay; it is the most tax effective scheme in the Mercosur. (You can read here more about the taxes of Paraguay)
A national or foreigner has to set up a company in Paraguay that bears some relationship with another company located in another country. It can be a natural or juridical person, as well as a company that has idle capacity.
Capital requirements of the Maquila:
There are no capital limits or minimum amounts of investment. It can be capital abroad, local capital or a mix of these two.
Where can you set up your Maquila operations?
You are free to settle anywhere in Paraguay, but sometimes investors must adapt to regional requirements in particular cases (for example environmental provisions).
What type of companies can you use for the Maquila?
Individuals or legal entities (Corporations, Limited Individual companies, Limited Liability Companies, Branches of Foreign Companies) qualify for the Maquila low-tax reexport regime.
How can your company apply to enter in the Maquila tax regime?
You can carry out “maquila activity” after the CNIME approved your project (Maquila Program).
There are several types of the Maquila industry:
- Maquila Production of Goods (Maquila de Producción de Bienes)
- Maquila Services
- Maquila Intangible Services
- Sub Maquila
Operation Forms of the Maquila:
- Pura Maquila
- Maquila for idle capacity
- Sub Contract
- Twin Plants
- Albergue (Shelter)Program
What does it mean “added value in Paraguay”?
Paraguay is the single MERCOSUR country that requires only 40% of regional value plus 60% outside the zone value to get origin (certificate of origin).
Do I have to pay duty or tax to import in Paraguay?
No. There is a unique customs scheme for Maquila companies, the “Temporary Admission” or “Maquila Temporary Import”. This is a temporary entry system and allows duty-free admission of capital goods (machinery, tools, equipment, and vehicles to carry out public and private construction work.)
How long can the imported goods stay in Paraguay?
Practically, the goods(raw materials and supplies, parts or components) may stay one year (initial six months and it is easy to expend to more six months.) The timeframe does not apply for capital goods/fixed assets (for example the machinery and equipment of the production line), these can stay several years in Paraguay, clarified in the Maquila Program of the entrepreneur.
Do you want to start a Maquila business? Do you need all practical information and planning by local experts of the Maquila regime? Contact us here!